Extra-judicial payment of provisional damages an ‘admission of liability’, judge rules

An offer by a party to settle a case out of court by making a payment of provisional damages “inherently carries with it an admission of liability”, a judge in the Court of Session has ruled.

Lord Uist dismissed claims that there was “no requirement” for a defender to admit liability when an action had settled extra-judicially.

The court heard that an action of damages for personal injuries raised by the pursuer David Boyd, which arose out of the pursuer having developed an asbestos-related condition, was settled extra judicially.

The pursuer accepted from all three defenders in the action - Gates (UK),Scottish Agricultural Industries, and National Grid Gas - an offer of £6,300 provisional damages together with a right on his part to apply to the court for further damages if he developed diffuse plural thickening, lung cancer or mesothelioma.

However, the second defenders refused to accept the wording of a draft joint minute as they sought to reserve the right to put the pursuer to proof on liability in the event that he made an application for further damages if he developed any of the three conditions.

The court heard that it was “well‑established” that at common law a person has only one action in which to recover losses sustained as a consequence of the negligence or breach of statutory duty of another.

In Scotland that rule has been abridged by the provision in section 12 of theAdministration of Justice Act 1982, which empowers the court to make an award of provisional damages and at a subsequent date to make an award of further damages if a person develops a specified disease or suffers a deterioration in his condition.

Although it may be agreed between parties that a pursuer should receive a provisional award of damages, the right to make an application for further damages can be preserved only by the court making an order to that effect under section 12.

It was submitted on behalf of the second defenders that it was “misconceived” to think that it was incompetent for the court to make an order under section 12 in the absence of liability having been admitted or proved.

An offer of provisional damages by a defender was “not tantamount to an admission of liability”, it was argued.

A defender could, as was the case here, make a payment of provisional damages to settle extra judicially for “reasons of economy” and to avoid the expense of putting a pursuer to proof on the issue of liability.

If an offer of provisional damages carried with it an implied admission of liability that would be likely to “deter potential settlements” and it was important for the court to consider the public interest in the desirability of extra‑judicial settlements being reached, it was submitted.

The second defenders entirely accepted that it was appropriate for a section 12 order to be made in the present case and that the court had to pronounce an interlocutor setting out those terms and the conditions which had to be fulfilled for the making of an application for further damages, but that did not require an admission of liability to be made as part of the interlocutor.

The submission for the pursuer consisted of five points. The first was that, on a proper construction of section 12(1)(a) an offer or agreement by a defender to make a payment of provisional damages to a pursuer “impliedly” carried with it an admission of liability.

The second point was that an order by the court under section 12 was necessary to enable a pursuer to make an application for a further award of damages, as there was no other available mechanism for him to do this, which contrasted with the procedure relating to an award of interim damages - under which it was open to the court to make an award of interim damages under Rule of Court 43.11(2)(b) without liability having been admitted by the defender.

The third point was that the making of an offer of provisional damages by a defender amounted to an admission of liability if it was accepted by a pursuer. Where a defender offered to settle by way of a payment of provisional damages under section 12 it was implicit that no issue of liability remained.

The fourth point was that in an application for an award of further damages the only issues to be dealt with were whether the pursuer had developed the specified condition, whether it had been caused by an act or omission of the defender and the amount of further damages which it was appropriate to award.

The fifth point was that if liability was reserved under a section 12 order and it was open to the court to hold in an application for further damages that a defender was not liable, that would leave the earlier decree in doubt and would mean that a pursuer would have to repay the award of provisional damages previously paid to him.

The judge ruled that all five points made in the submission for the pursuer were “well‑founded”.

In a written opinion, Lord Uist said: “It is clear to me that the whole scheme of section 12 proceeds on the basis that in the particular case liability is no longer in issue.

“A court does not make an award of damages for personal injuries unless liability has been admitted or proved.

“It would be strange indeed if, the court having made an award of damages against a defender and allowed the pursuer to apply to the court for a further award of damages, it would be open to the defender nevertheless to contest the issue of liability when an application for a further award of damages was made.

“In my opinion section 12 is a scheme setting out the procedure to be followed in making awards of damages in certain circumstances and it operates only once the issue of liability has been determined or agreed.

“An offer by a defender to make a payment of provisional damages therefore inherently carries with it an admission of liability.”